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October 5, 1999

Sterling Set to Rebound With Better-Than-Expected Q4

By CBR Staff Writer

E-commerce software vendor Sterling Commerce Inc said Tuesday that it will post better-than-expected results for its recently- completed fourth quarter. Columbus, Ohio-based Sterling expects revenues to be in the range of $157m to $159m and earnings per share to be $0.41 to $0.42, when analysts surveyed by First Call were expecting $0.39.

Those estimates exclude expected results from the XcelleNet business the company decided to divest after only one year of ownership and previously announced one-time charges in connection with its restructuring plan. In August, the company said it would cut 200 jobs in the wake of a poor third quarter and would take a charge of $25m to $30m in the fourth quarter to cover employee severance, facilities scale-down, and other expenses.

Including the XcelleNet business, revenue for the fourth quarter should be in the range of $173m to $176m. Sterling has enlisted the help of Broadview International to assist it in selling XcelleNet, which it purchased in August of 1998 for $200m only to discover a lack of strategic synergies, according to the company.

In the third quarter, Sterling posted net income of $37m, or $0.38 per share, including a one-time gain of $0.02. Analysts had been expecting $0.05 more from the quarter. In addition to XcelleNet, the company blamed delays in closing several large deals and lower-than-expected sales growth for more traditional EDI and file transfer products, due to Y2K issues and the maturity of the market segments.

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